Description: In the battle between the two huge letter A tech companies, Apple and Alphabet, Alphabet (formerly known as Google), has supplanted Apple as the largest company in the world as measured by market valuation. Apple had held the top spot since replacing Exxon in 2012. Alphabet, the new holding company that owns Google and a second division known as ‘Other Bets”, has been rising on Google’s growing advertising sales. Meanwhile, Apple’s decline is linked to the end of explosive growth in iPhone sales.
Date: February 1, 2016; updated February 2, 2016
1) Alphabet is trading at roughly 38 times earnings. What ratios commonly studied in introductory accounting are relevant here?
2) Apple is known as a dividend-paying company while Alphabet is not. What financial ratio or ratios would help an investor see which company is a better choice for investors interested in dividends?
3) Do you think Apple will be able to reach the top again? What will it take?